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Wall Street Poised to Get a Key SEC Reprieve Over MiFID

Traders Magazine Online News, October 23, 2017

Bloomberg News

The U.S. Securities and Exchange Commission is preparing to give Wall Street a reprieve by telling financial firms they won’t have to overhaul their operations to comply with sweeping new European rules governing investment research, said three people familiar with the matter.

In a report on Bloomberg, the SEC is expected to provide formal assurances by the end of the month that it won’t object if brokerages break out the cost of market analysis for their European clients, rather than bundling it together with other services, the people said. Europe is requiring that brokers charge separately for research, but doing so could violate U.S. regulations.

At issue is Europe’s coming ban of a practice that has been routine at global banks for decades: Issuing fund managers one bill for everything from executing trades to analyzing stocks and bonds. Europe’s goal is to give investors more transparency into how much they pay for specific services, while incentivizing brokers to produce higher-quality research.

But in an odd twist, brokers say SEC rules technically prohibit them from selling stand-alone analysis unless they register with the agency as investment advisers. The investment adviser label subjects firms to a much stricter level of oversight, and has traditionally been meant for companies and individuals who manage clients’ money.

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